I don't think the technical analysis signals would apply if insider trading were legalized. The "edge" you see in TA assumes that market participants are trading the way they do in the current market environment.. But if insider trading were legalized, I think you'd see more like an immediate price spike or immediate price drop when material information becomes known to the insider. The CEO, CFO, accountants, auditor, IT guys etc. would all be backed by multi-billion dollar hedge funds who are trying to outrace each other to the information. Corporate officers would no longer focus on their real jobs.. they'd basically spend all their time trying to get information for trading purposes. If there are any inefficiencies in the market, they don't stay inefficient for long.
The real world simply does not work this way. Look, unless you are talking about some brother in law of a company buying 500 shares of some stock, it's not easy to move size in any market. Size has to be worked. And that order is going to show up on the tape. I know, I use to watch the tape like a hawk back in the day when you could piggyback that size. TA applies to anything that is hitting the tape, inside or otherwise. Orders print on the tape and and that tape draws charts and those charts can be read. There is no way around this.
exactly the point I'm trying to make. instead of the few ballsy now everyone with this information first can spread it like wildfire and it would most definitely show up in pirce right away...
The technician sees a tall candle, on low volume. The the tall candle is a new trading range. There will be a pullback, while the market tries to figgur out what the hell happened. When the news comes out, there is a resumption of the prior trend, on heavier volume because the information is now public. My point? An inside trade to a technician is actually a harbinger. It in fact gives MORE time to get onboard, not less. Wish I had some old Enron charts to show.
www.CapitalistPig.com holds that viewpoint. http://www.smartmoney.com/investing/stocks/ponder-this-should-insider-trading-be-a-crime/
One point that I've never seen addressed by those who say that insider trading should be legal is the bad incentives it would create for the management of public companies. In a world where insider trading is legal, the CEO has dual incentives. He can make money the hard/slow way by growing the company, or he can make money the easy/fast way by manipulating the stock price and profiting from trading those manipulations. We are all better off when the senior management has incentives that encourage growing the company rather than manipulating the market. Another problem is that in virtually all bankruptcies we'd see the CEO walking away making a fortune from shorting their own stock. It creates public anger when a CEO runs a company into the ground, and then walks away with a golden parachute. Golden parachutes are nothing compared to what could be made from shorting the stock ahead of everyone else. Imagine if the CEO of AIG made 4 billion dollars from shorting AIG stock? The public would be furious. I wonder if capitalism and democracy could even survive in a world where that kind of thing happened on a regular basis.
I don't think anyone is advocating for insider trading. Just that it doesn't hurt investors if it's minimal.
Precisely, I know I am not advocating it, but I am speaking as a semi-pro trader. No matter what happens, the chart will record it. For us insider trading is a non starter because when she does it, we will see it. If it is enuf to trigger a feedback loop we will see that too. Honestly, insider trading should not be that big a deal for us.
exactly. Currencies it's legal and happens all the time. Someone want to explain to me the difference between lying on CC's/ forward-looking statements and insider trading? It's quite the grey area. I think we could focus our attention on better things like erasing every regulation the SEC has made over the past 15 years. Let the insiders do it. SEC is going after the FEW unlucky individuals who suck at it.